Removing performance ratings? 8 steps to follow

Organisations which remove performance ratings as part of the review process are putting employee performance at risk

Organisations which remove performance ratings as part of the review process are putting employee performance at risk, according to a research report, which outlined the steps such organisations need to take in order to make the transition a successful one.

The research comes on the heels of the recent “ratings debate”, which has seen a number of high profile companies announce they were to abandon the use of performance ratings systems.

Importantly, it found that having no rating system in place is detrimental to both managers and employees, and high performers in particular.

Organisations that removed performance ratings experienced a 28 per cent drop in the productivity of their high performers, according to the CEB research, which took in 9500 employees and 300 heads of HR from a wide range of organisations globally, with and without ratings (including many of the earliest adopters of ratings removal).

It found that recognition and feedback provides essential reinforcement to high performers of the contribution they’re making to the organisation.

While many organisations report that pay differentiation increased when they removed ratings, however, employees believe there is less differentiation because managers struggle to explain how pay decisions are made and linked to individual contributions.

Furthermore, although a handful of managers are more effective without ratings, most organisations will find it too difficult to get their managers to the level needed to make the change worth the significant investment.

While the lack of performance ratings may take the pressure off managers in terms of time, they also suffer as they are no longer as closely connected to their teams, according to CEB report, The Real Impact of Eliminating Performance Ratings.

In fact, perceptions of manager conversation quality dropped 14 per cent for those without performance ratings.

In addition, employee performance is 10 per cent lower in organisations without ratings, while employee engagement scores are 6 per cent lower and organisations without performance ratings spend 16 per cent less time on informal performance conversations.

“Recognition and feedback provides essential reinforcement to high performers of the contribution they’re making to the organisation”

While many organisations have received positive feedback after eliminating performance ratings, this initial positive reaction tends to fade and the key performance outcomes that organisations expected to increase actually suffer.

As such, organisations looking to abandon performance ratings should follow eight steps, according to the research report:

  1. Communicate new performance management philosophy and processes to employees so they understand what to expect and how it is intended to benefit them.
  2. Identify new and different ways to recognise high performance outside the traditional performance management process to improve employee engagement.
  3. Set expectations for the timing and frequency of performance conversations to encourage managers and employees to have regular discussions.
  4. Allow employees to own performance conversations so that they can customise discussions and share accountability with managers.
  5. Measure the quality, not just occurrence, of manager conversations through existing employee surveys or other feedback mechanisms to focus managers on conversation quality.
  6. Train managers to send clear messages about performance and development without ratings by providing concrete evidence of how the employee is performing and progressing.
  7. Guide managers to make pay decisions by using simple criteria such as performance against role, goal achievement, and role criticality to identify employees who should receive the highest awards.
  8. Connect a summary of the employee’s contributions to their pay decision, and provide organisational context to show employees how pay decisions were made fairly.

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